If you have been researching bankruptcy as an option to help you eliminate student loan debt, you know that the chances of that happening are almost zero. Student loans are virtually impossible for the typical debtor to eliminate. Even so, bankruptcy can sometimes be an option to help you manage student loan debt by eliminating other types of debt, such as credit cards and medical bills. If that isn’t enough to get your finances in control, Chapter 13 bankruptcy can be even more helpful in managing your student loans.
One way Chapter 13 bankruptcy can help with student loans is that the student, not the lender, determines the size of the student loan payment over the course of a three to five year repayment plan. In a Chapter 13 bankruptcy, the student’s income will determine how much will be paid to her unsecured creditors, which includes student loans. During the three to five years, no collection action, garnishment, or tax intercepts can be taken against the student. It’s important to remember that the student loan will most likely not be paid off during the Chapter 13 bankruptcy, and the student loans will still be there once the bankruptcy is closed
Another benefit is that if someone else has co-signed the student loans, and the lender is pursuing the co-signer, Chapter 13 will prevent the lender from taking any collection action against that person as long as the repayment plan provides for the payment of the student loans.
Finally, Chapter 13 may also help get student loans out of default so that the student can take advantage of other repayment options in the future, such as deferment, forbearance, or income based repayment.
If you are struggling with overwhelming student loan debt, we hope you’ll come in for a free, no-obligation consultation with an experienced Colorado bankruptcy lawyer to learn how bankruptcy may help. You can schedule an appointment by calling 303.331.3403 or by using our online scheduling system.